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Major content providers are playing hard to get with IPTV start-ups. Though the new technology could lead to entirely new ways of watching TV, the motion picture studios are not yet convinced.

Part of the problem has to do with how powerful the technology is. Because IPTV uses huge centralized servers to deliver video into consumers’ homes, it can support a nearly unlimited number of channels and allow customers to pick from an à la carte channel selection. It can offer events available “on demand” at the push of the button.

IPTV differs from earlier forms of Internet-based TV in that, while the video signal is encoded just like data over the Web, it travels solely over the telco’s own servers and network. Viewers will find the experience akin to watching digital cable, rather than streaming video on the Web.

But the technology matters only if the movie studios and other content providers play along. Walt Disney hasn’t signed with any outside distributor to provide its movies for video-on-demand. Likewise, most studios have agreed to only limited video-on-demand distribution, fearing it could cut into revenues from rentals and DVD sales — now generating bigger income streams than the box office itself.

So far, the telcos, led by SBC, Verizon and BellSouth, are moving ahead with their plans for three of the biggest IPTV deployments in the world. When completed in less than two years, SBC’s service will extend to 18 million homes in 13 states and cost an estimated $4 billion. It also puts the telecom in direct competition with cable companies who are, in turn, venturing onto Baby Bell turf by offering phone service.

It’s clear the big studios and other content providers are uneasy about jumping on board the IPTV bandwagon, it may be impossible for the new distribution technology to truly come into its own. The telcos have hired teams of program executives to try to turn around a very challenging situation, the report said.

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